Butter prices in Germany, a benchmark for the European market, have increased significantly in recent months, reaching €7.80 per kilogram as of the end of August.
This marks a 77.3% increase compared to the same period in 2023, according to Italian market analysis portal Clal.it.
The butter price is also one of the highest ever recorded in Germany.
Impact On Other Categories
Clal.it warned that similar price increases could ripple through other dairy product categories, with rising prices for spot milk in Germany, Italy, and the Netherlands suggesting broader market pressures.
With strong demand for fats and the profitability of cheese production, Clal.it anticipates that processing companies may prioritise these areas in the coming weeks. This shift could be driven by a less dynamic Skimmed Milk Powder (SMP) market.
However, overly focusing on profitable products like butter, cream, and cheese could be risky if global demand weakens or geopolitical challenges arise. The dairy trade market is, after all, global, and unforeseen factors can impact prices.
Factors Behind Price Increases
Several factors are contributing to the butter price surge. While milk deliveries in Germany remain consistent with last year, the fat content in milk is declining.
Additionally, low prices for powders, due to weak global demand, particularly from China, are discouraging powder production. This shift is favouring cheese production, further reducing the availability of fat for butter.
Other factors influencing butter prices include a seasonal decline in milk production and increased international demand for fats. Given these dynamics, it's likely that butter prices in Italy will also experience upward pricing pressure.
